Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 2

Flexible budgeting The cost formula for the maintenance department of Rainbow, Ltd., is $12,600 per month plus $4.50 per machine hour used by the production department.

Required:

a. Calculate the maintenance cost that would be budgeted for a month in which 15,200 machine hours are planned to be used.

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b. Prepare an appropriate performance report for the maintenance department assuming that 16,120 machine hours were actually used in the month of June and that the total maintenance cost incurred was $83,650.

Step 1 of 3

a.

Compute maintenance cost:

Thus, total maintenance cost of Rainbow is.